Developing the World's Largest Commercial Jet
In this case, we will be analyzing strategic interaction between
Airbus and Boeing, the two leading producers in the global commercial
aircraft industry. In particular, we will be considering Airbus'
proposed launch of the A3XX, their entry into the intercontinental
jumbo jet segment, and Boeing's potential competitive responses to
this entry. We will attempt to answer the questions: Should Airbus
enter the jumbo jet segment? If so, how? And, what should Boeing do
about it?[1]
An appropriate analysis of this situation requires the integration of
a variety of tools and concepts to which you have been introduced both
in this course and the rest of the MBA curriculum. In particular, you
will use cashflow analyses of the different scenarios that could play
out in this industry and attempt to understand which of these
scenarios are more likely to occur by applying game theoretic
reasoning to this situation. Based on this analysis, you will then
make recommendations concerning what your team thinks Airbus or Boeing
should do[2]. While your quantitative analysis of this situation
should form a basis for your recommendation, you should certainly
consider other factors you deem important (but not accounted for in
the model) when you finalize your recommendation.
The attractiveness of the superjumbo segment of the market will depend
on, among other things, whether the rival firm enters the market.
Since payoffs depend the actions of others, game theory is necessary
to make the entry decision. We already know the players: Airbus and
Boeing. Airbus can choose to launch the A3XX or not launch t...
... middle of paper ...
...pears if Boeing launches a new plane. This leads to
another point. The model explicitly assumes that operational
efficiency is the only form of differentiation advantage available to
Airbus and Boeing, but there are others. For example, we might expect
the design of the passenger cabin, etc. would be important to Airbus'
and Boeing's customers, the airlines. In addition, Boeing probably has
more brand name and reputation capital than Airbus. After all, the 747
has been flying for 30 years with one of the lowest accident records
of any aircraft. These are just a few examples of the types of issues
you can think about. Obviously, given the space constraints that you
face, you can't write about everything, and you need to prioritize
your analysis. But, it is good practice to think in pretty broad terms
about these issues.
Despite the uncertainty and inherent risks, however, even if WACC exceeds IRR, the board may be well advised to accept the project. It's expected that in the first few years, Boeing will incur more expenses that income. The revenues will come at a later date when the 7E7 planes are delivered. The project will have to be evaluated periodically and management will have to make changes to ensure that the company is profitable based on current and future conditions. The board's prerogative is not to give Airbus a profit sanctuary' by not accepting the project but rather to maintain or increase its market in the industry even if it's not profitable in the shot-run. Boeing has deep pockets' and should be willing to challenge its competitors.
Use of a single-type aircraft fleet. The A320 Airbus has an increased seating capacity of 30 seats (24 after additional seating reconfigurations), is cheaper to maintain, fuel efficient and reduces training costs, relative to other aircraft models used in the industry.
Overall the Boeing Company has stayed strong in the aircraft field and with record profits for the past two years it looks like they are achieving their goals. Boeing has had to change their business direction over the past 100 years in order to stay a top of the aircraft industry. To maintain a good successful business they must have used a system similar to this SWOT analysis to see where Boeing needed to be to capitalize the market. Before Boeing decided that outsourcing was the way to go, a group of Boeing peers got around a table and weighed out the pros and cons. In their business analysis they saw a way to change one of their weaknesses, in-house work overload, into a potential strength. Major business decisions like this are much easier to commit too, with the use of a SWOT analysis.
As airline industry is a competitive marketplace, the airline companies use new technologies to improve their efficiency and decrease the overhead costs, including ‘advanced aircraft engine technology, IT solutions, and mobile technology’ (Cederholm 2014). The technology changes including technology improvement, new innovation and disruptive technology. The disruptive technology need to meet the characteristics of ‘simplicity, convenience, accessibility and affordability’ (Christensen 1995). The technology changes would bring both opportunities and threats to airline companies. Since Labour cost and fuel costs occupy 50% of most airlines operating cost (Groot 2014). Therefore, if new technologies could be disruptive in the two aspects, there will be important changes to current airline
This paper analyzes the goals and actions of Boeing by analyzing its critical success factors as well as its strategic roadmap.
The future of the aerospace industry will involve gradual changes in the near term, with the prospect of more radical shifts in the decades t...
...leader. Certainly, it has to take into account the implications of completion from both the direct and the indirect competitors. That is why EasyJet centers on the cost management strategy and the differentiation strategy (Hanlon, 2007). Through an analysis of EasyJet Airplane company strategies and performance, it is clear that they are ambitious and strive for the best. They not only survive in an industry that is intensely competitive, as shown through the analysis by Porter's Five Forces, but also succeed in terms of offering their customers the best that they have to offer in terms of value for money. The advantage this airline gains over its oligopolistic competitors stems from flexible ticketing and complete access to all primary routes. However, in keeping airline industry, there is room for improvement and growth as the analysis using Ansoff Matrix reveals.
[6] Airbus A380 superjumbo of the 21st century, guy Norris and mark Wagner, published 2005
The new entry is likely from rich Gulf nations, China, and India of low budget planes around the globe. The airlines from the Gulf nations have placed orders with Airbus and Boeing that are valued in the billions. The deliveries are expected in the next decade. The demand will grow in the production of advanced narrow-body airplanes, such as Airbus, A321 and Boeing, B737 Max. The growth that is expected in the next decade, more consumers will be flying to their destinations. The airlines in the United States are expected to have a profit margin over the next decade. Resulting, from economic growth, and the demand for aircraft service. Buyers are expected to have a lot of power in the next decade, resulting in bargain prices for buyers. The competition will increase with intense rivalry in the aviation industry. The contracts for the aircrafts are totally from airplane
Alliance with Airbus: - May never be possible given their histories. Certainly isn’t good for the air travel industry.
... Boeing has gained a reputation for its forward thinking approach to their business model. Boeing appears to be a company that isn’t afraid of risk because they understand nothing risked is nothing gained. In 2001, when the airline industry collapsed after 9/11, they could have folded their 737 division up or sold it off to a competitor, but instead they found a way to make it work, and make it work better than it had previously. During World War II, and the Korean War, Boeing’s innovation helped the US Armed Forces achieve their military goals, and at the same time positioned themselves as the major player in the defense business.
It has stayed relevant to the market through its propelled philosophy of relationships to generate profits in the business. Since its establishment in Monroe, Louisiana the once tiny airline has stretched to greater heights serving in 6 continents. It has also established a distinguishable name among its competitors with a reputation of leading customer services. However, even as an established venture, the company needs to maximize its profits in order to stay in business and expand in to new territories beyond its conquered boundaries. A strategic analysis was carried out by our team to establish the company’s current situation. A SWOT analysis was performed to come up with three referenced, strategic alternatives. This alternatives are meant to act as a strategic guidance to the company in order to enhance growth. The strategic recommendation provided will improve and enable the business to cope with the competitors while the implementation of the strategy section will outline the way to go about achieving these alternatives in the business setting. Lastly, we put up a discussion on the evaluation procedures and necessary controls for the
The purpose of this essay is to analysis the easyJet plc about the company’s operation performance, financial status and the ability to control different risks. To achieve the aim, the investigation of the essay will include the following parts: the introduction of the company, the financial trends during the last 5 years, the method about how does the company do their globalization, and how does the company manage the risks that along with the globalization. Finally, the recommendation will be given to the company.
Golden, D., Smith, D. and Deighan, M. (2014). Airline The Strategy Simulation. [online] Schools.interpretive.com. Available at: http://schools.interpretive.com/fsui/data.php?token=0&c=filedl&id=ugohfu/mnmxohy_nugohfu&z=1398582366830 [Accessed 27 Apr. 2014].
In 1990 Boeing was set to introduce the 777, the world’s largest and longest haul twin-bodied jet at the time. The 777 would serve the medium and long haul markets like the expanding Asian market. Boeing’s main competitors, Airbus Industries and McDonnell Douglas, had already announced plans to produce airliners that would compete directly with the 777. Analysts believed that the intense competition between the manufacturers would serve to depress prices for the airliners. Lower prices for aircraft would mean lower earnings.